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ARGO Group Limited Interim Results for 6 months ended 30 June 2020

31/07/2020 7:00am

UK Regulatory (RNS & others)


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TIDMARGO

RNS Number : 6955U

ARGO Group Limited

31 July 2020

Argo Group Limited

("Argo" or the "Company")

Interim Results for the six months ended 30 June 2020

Argo today announces its interim results for the six months ended 30 June 2020.

The Company will today make available its interim report for the six months period ended 30 June 2020 on the Company's website www.argogrouplimited.com.

Key highlights for the six months period ended 30 June 2020

This report sets out the results of Argo Group Limited (the "Company") and its subsidiaries (collectively "the Group" or "Argo") covering the six months ended 30 June 2020.

   -     Revenues US$1.4 million (six months to 30 June 2019: US$2.4 million) 
   -     Operating loss US$0.4 million (six months to 30 June 2019: US$0.03 million) 
   -     Profit before tax US$0.2 million (six months to 30 June 2019: US$1.5 million) 
   -     Net assets US$21.4 million (31 December 2019 restated: US$21.3 million) 

Commenting on the results and outlook, Kyriakos Rialas, Chief Executive Officer of Argo said:

"The outbreak of the Covid-19 pandemic has been totally unexpected but Argo Group took early measures to protect the health of its employees and their families. The office was closed early on with employees working from home and key operations such as trading and settlements functioned smoothly with remote secure computers. The market volatility that resulted provided trading opportunities and although March was a down month The Argo Fund recovered strongly from April to June resulting in a YTD return of 4.55%. In January 2020 Argo Group finalised the refinancing of the Odessa Riviera shopping mall in Ukraine with EBRD at improved terms. This involved the company contributing US$11.2 million to the outstanding loan balance.

Finally in July 2020 we have launched the Argo US Feeder Fund in an effort to attract US onshore investors as the Group's main target is to increase assets under management."

Enquiries

Argo Group Limited

Andreas Rialas

020 7016 7660

Panmure Gordon

Dominic Morley

020 7886 2500

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014.

The Group and its investment objective

Argo's investment objective is to provide investors with absolute returns in the funds that it manages by investing in multi strategy investments in emerging markets.

Argo was listed on the AIM market in November 2008 and has a performance track record dating back to 2000.

Business and operational review

For the six months ended 30 June 2020 the Group generated revenues of US$1.4 million (six months to 30 June 2019: US$2.4 million) with management fees accounting for US$1.2 million (six months to 30 June 2019: US$2.0 million). Management fees for the comparative period included USD$0.6 million earned from Argo Real Estate Opportunities Fund Limited ("AREOF"). The management contract with AREOF was terminated on 1 January 2020, so there was no fees earned from AREOF in the current period. The Group does not accrue for performance fees until they are crystalized at the year end.

Total operating costs for the period, ignoring bad debt provisions, are US$1.6 million compared to US$2.5 million for the six months to 30 June 2019 . The Group has provided against management fees of US$0.2 million due from the Designated share class in The Argo Fund ("TAF") (six months to 30 June 2019: US$0.3 million (EUR0.2 million) due from AREOF). In the Directors' view these amounts are fully recoverable however they have concluded that it would only be appropriate to recognise income without provision from these investment management services once a liquidity event occurs in this share class.

Overall, the financial statements show an operating loss for the period of US$0.4 million (six months to 30 June 2019: US$0.03 million) and a profit before tax of US$0.2 million (six months to 30 June 2019: US$1.5 million) reflecting the net profit on investments of US$0.2 million (six months to 30 June 2019: US$1.4 million) and interest income of US$0.4 million (six months to 30 June 2019: US$0.1 million).

At the period end, the Group had net assets of US$21.4 million (31 December 2019 restated: US$21.3 million) and net current assets of US$9.0 million (31 December 2019 restated: US$20.7 million) including cash reserves of US$1.6 million (31 December 2019: US$0.9 million).

Net assets include investments in TAF, ASSF LP and ADCF (together referred to as "the Argo Funds") at fair values of US$7.8 million (31 December 2019: US$18.6 million),), US$ nil (31 December 2019: US$0.1 million) and US$0.02 million (31 December 2019: US$0.8 million) respectively . On 30 June 2020, The ASSF LP was struck off. Its assets and remaining investors were moved to ADCF.

Business and operational review

At the period end the Argo Funds owed the Group total fees of US$0.3 million ( 31 December 2019 : US$0.9 million). At 30 June 2020, a provision for US$0.2 million was made against this amount as the timing of the receipt of the fees from the designated share class in TAF is uncertain. Moreover, the Group owes US$0.3 million to ADCF in overpayment of performance fees at the period end. This overpayment will be set off against future management fees that the fund will owe to the Group.

The Argo Funds ended the period with Assets under Management ("AUM") at US$130.4 million. The current level of AUM remains below that required to ensure sustainable profits on a recurring management fee basis in the absence of performance fees. This has necessitated an ongoing review of the Group's cost basis. Nevertheless, the Group has ensured that the operational framework remains intact and that it retains the capacity to manage additional fund inflows as and when they arise.

The average number of permanent employees of the Group for the six months to 30 June 2020 was 20 ( 30 June 2019 : 21).

Fund performance

The Argo Funds

 
                           30 June    30 June    2019 
                  Launch    2020       2019       year                             Sharpe   Down 
                                                         Since       Annualised 
Fund               date     6 months   6 months   total   inception   performance   ratio    months  AUM 
                           %          %          %       %           CAGR %                          US$m 
                  -------  ---------  ---------  ------  ----------  ------------  ------  --------  ------- 
                                                                                              76 of 
The Argo Fund     Oct-00        4.55       4.25    2.18      239.11          7.14    0.51       237    105.0 
                  -------  ---------  ---------  ------  ----------  ------------  ------  --------  ------- 
Argo Distressed 
 Credit Fund      Oct-08                                                                                25.4 
                  -------  ---------  ---------  ------  ----------  ------------  ------  --------  ------- 
Total                                                                                                  130.4 
                           ---------  ---------  ------  ----------  ------------  ------  --------  ------- 
 

The events of the first six months of 2020 caught most by surprise. At the beginning of the period markets were largely focused on the US electoral cycle and whether growth momentum would be maintained, particularly in the US and China, but very quickly attention turned to the impact of the previously little-known COVID-19 virus. Initially thought to be a localised problem in parts of Asia, the virus (and fear of it) spread to the rest of the world leading to a meltdown in global equity and credit markets from early March. Arguably, the response from governments, particularly the G7, was much faster compared with the 2008 Global Financial Crisis and they announced sizeable packages of monetary easing and fiscal support and stimuli alongside public health initiative measures such as lockdowns and travel restrictions. As confidence about a rapid economic recovery took hold, equity markets partially rebounded and delivered strong returns from April onwards. Emerging markets have not escaped the effects of COVID-19 despite the perceived advantage of a younger demographic; some like Brazil have recorded a high number of infections and deaths whilst others have seen their economies adversely affected by the sudden halt in global growth and trade and direct hits on sectors including oil and tourism. Countries such as Argentina and Lebanon had already signalled a need to restructure their external debts, but the strains of falling demand and additional health costs have led to wider calls for debt relief, particularly for poorer countries. Although government creditors (including China) have begun to implement this for those countries that have requested it, there remains a large question mark over the necessity and operability of involvement by private creditors such as bond investors.

The Class A NAV of TAF increased by 4.55% in the first half of 2020, compared to a rise of 4.25% in the same period of the previous year, but against a very different -and more volatile- global economic and financial backdrop; for example, the benchmark JP Morgan EMBI+ bond index fell by 0.4% in the first six months. The fund was conservatively positioned, with low net exposure, heading into the first quarter sell-off and whilst TAF suffered a drawdown in March, it was not of the scale witnessed in some other funds. The losses were clawed back and more by a judicious choice of long bond positions that benefited from positive developments in sovereign restructurings and the oil market. At the end of 2019, the decision was taken to restructure the fund, creating a master/feeder structure. Class A shares issued by TAF continue to be invested in a diversified debt and macro positions which seek to capture alpha through long and short investment in liquid EM corporate and sovereign bonds and FX. In addition, there are new classes of Designated Investments which offer investors exposure to distressed and special situations where the timeline to investment realisation will be three years or more. A US feeder fund was also recently established in order to widen the potential pool of investors in that jurisdiction.

Dividends and share purchase programme

The Group did not pay a dividend during the current or prior period . The Directors intend to restart dividend payments as soon as the Group's performance provides a consistent track record of profitability.

Outlook

The Board remains optimistic about the Group's prospects based on the transactions in the pipeline and the Group's initiatives to increase AUM. A significant increase in AUM is still required to ensure sustainable profits on a recurring management fee basis and the Group is well placed with capacity to absorb such an increase in AUM with negligible impact on operational costs.

Boosting AUM will be Argo's top priority in the next six months. The Group's marketing efforts will continue to focus on TAF which has a 19-year track record as well as identifying acquisitions that are earnings enhancing.

Over the longer term, the Board believes there is significant opportunity for growth in assets and profits and remains committed to ensuring the Group's investment management capabilities and resources are appropriate to meet its key objective of achieving a consistent positive investment performance in the emerging markets sector.

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER

COMPREHENSIVE INCOME

FOR THE SIX MONTHSED 30 JUNE 2020

 
                                                       Six months       Six months 
                                                            ended            ended 
                                                          30 June          30 June 
                                                             2020             2019 
                                                Note      US$'000          US$'000 
 
 Management fees                                            1,227            2,013 
 Performance fees                                               -              300 
 Other income                                                 144              122 
=============================================  =====  ===========      =========== 
 Revenue                                                    1,371            2,435 
=============================================  =====  ===========      =========== 
 
 Legal and professional expenses                            (267)            (303) 
 Management and incentive fees payable                          -             (34) 
 Operational expenses                                       (335)            (520) 
 Employee costs                                           (1,202)          (1,291) 
                                                 9, 
 Bad debt provision                              10         (203)            (295) 
 Foreign exchange profit/(loss)                               313             (20) 
 Depreciation                                    7           (97)              (5) 
 Operating loss                                             (420)             (33) 
=============================================  =====  ===========      =========== 
 
 Interest income                                              409               90 
 Realised and unrealised gain on investments     8            205            1,438 
=============================================  =====  ===========      =========== 
 Profit on ordinary activities before 
  taxation                                                    194            1,495 
=============================================  =====  ===========      =========== 
 
 Taxation                                        5              -             (19) 
=============================================  =====  ===========      =========== 
 Profit for the period after taxation 
  attributable to members of the Company         6            194            1,476 
 Other comprehensive income 
 Items that may be reclassified subsequently 
  to profit or loss: 
 Exchange differences on translation 
  of foreign operations                                      (15)             (44) 
=============================================  =====  ===========      =========== 
 Total comprehensive income for the 
  period                                                      179            1,432 
=============================================  =====  ===========      =========== 
 
                                                       Six months       Six months 
                                                            Ended            Ended 
                                                          30 June          30 June 
                                                             2020             2019 
                                                              US$              US$ 
 Earnings per share (basic)                      6          0.004             0.03 
=============================================  =====  ===========  =============== 
 Earnings per share (diluted)                    6          0.005             0.03 
=============================================  =====  ===========  =============== 
 
 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2020

 
                                            30 June   31 December 
                                               2020          2019 
                                                         Restated 
                                   Note     US$'000       US$'000 
 Assets 
 
 Non-current assets 
 Land, fixtures, fittings and 
  equipment                         7           541           661 
 Financial assets at fair value 
  through profit or loss            8             -            56 
 Loans and advances receivable      10       12,042           120 
================================  =====  ==========  ============ 
 Total non-current assets                    12,583           837 
================================  =====  ==========  ============ 
 
 Current assets 
 Financial assets at fair value 
  through profit or loss            8         7,839        19,357 
 Trade and other receivables        9           452           951 
 Cash and cash equivalents                    1,601           863 
 Total current assets                         9,892        21,171 
================================  =====  ==========  ============ 
 
 Total assets                                22,475        22,008 
================================  =====  ==========  ============ 
 
 Equity and liabilities 
 
 Equity 
 Issued share capital               11          390           390 
 Share premium                               25,353        25,353 
 Revenue reserve                            (1,352)       (1,546) 
 Foreign currency translation 
  reserve                                   (2,947)       (2,932) 
================================  =====  ==========  ============ 
 Total equity                                21,444        21,265 
================================  =====  ==========  ============ 
 
 Current liabilities 
 Trade and other payables                       870           443 
 Tax payable                                      -            20 
================================  =====  ==========  ============ 
 Total current liabilities                      870           463 
--------------------------------  -----  ----------  ------------ 
 
   Non-current liabilities 
 Trade and other payables           15          161           280 
--------------------------------  -----  ----------  ------------ 
 Total non-current liabilities                  161           280 
--------------------------------  -----  ----------  ------------ 
 
 Total equity and liabilities                22,475        22,008 
--------------------------------  -----  ----------  ------------ 
 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE SIX MONTHSED 30 JUNE 2020

 
                                                                        Foreign 
                               Issued                                  currency 
                                share       Share     Revenue       translation 
                              capital     premium     reserve           reserve     Total 
                                 2019        2019        2019              2019      2019 
                              US$'000     US$'000     US$'000           US$'000   US$'000 
 
 As at 1 January 2019             470      28,022     (2,363)           (2,860)    23,269 
 
 Total comprehensive 
  income 
 Profit for the period 
  after taxation                    -           -       1,476                 -     1,476 
 Other comprehensive 
  income                            -           -           -              (44)      (44) 
 Transaction with owners 
  recorded directly in 
  equity 
 Purchase of own shares          (80)     (2,669)           -                 -   (2,749) 
 
 As at 30 June 2019               390      25,353       (887)           (2,904)    21,952 
=========================  ==========  ==========  ==========  ================  ======== 
 
 
                                                                              Foreign 
                                     Issued                                  currency 
                                      share       Share     Revenue       translation 
                                    capital     premium     reserve           reserve     Total 
                                       2020        2020        2020              2020      2020 
                                    US$'000     US$'000     US$'000           US$'000   US$'000 
 
 As at 1 January 2020 restated 
  (note 16)                             390      25,353     (1,546)           (2,932)    21,265 
 
 Total comprehensive income 
 Profit for the period after 
  taxation                                -           -         194                 -       194 
 Other comprehensive income               -           -           -              (15)      (15) 
 As at 30 June 2020                     390      25,353     (1,352)           (2,947)    21,444 
===============================  ==========  ==========  ==========  ================  ======== 
 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHSED 30 JUNE 2020

 
                                                   Six months   Six months 
                                                        ended        ended 
                                                      30 June      30 June 
                                                         2020         2019 
                                            Note      US$'000      US$'000 
 
 Net cash inflow/(outflow) from 
  operating activities                       12           195         (32) 
=========================================  =====  ===========  =========== 
 
 Cash flows used in investing activities 
 Interest received on cash and 
  cash equivalents                                          3            8 
 Purchase of fixtures, fittings 
  and equipment                              7            (1)          (1) 
 Proceeds from sale of financial 
  assets at fair value through profit 
  or loss                                    8         11,779            - 
 Loan investments                                    (11,200)            - 
 
 
 Net cash generated from investing 
  activities                                              581            7 
=========================================  =====  ===========  =========== 
 
 Cash flows from financing activities 
 Payment of lease liabilities                            (44)            - 
 Repurchase of own shares                                   -      (2,749) 
 
 Net cash used in financing activities                   (44)      (2,749) 
=========================================  =====  ===========  =========== 
 
 Net decrease in cash and cash 
  equivalents                                             732      (2,774) 
 
 Cash and cash equivalents at 1 
  January 2020 and 
  1 January 2019                                          863        4,005 
 
 Foreign exchange loss on cash 
  and cash equivalents                                      6         (63) 
 
 Cash and cash equivalents as at 
  30 June 2020 and 30 June 2019                         1,601        1,168 
=========================================  =====  ===========  =========== 
 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2020

   1.       CORPORATE INFORMATION 

The Company is domiciled in the Isle of Man under the Companies Act 2006. Its registered office is at 33-37 Athol Street, Douglas, Isle of Man, IM1 1LB. The condensed consolidated interim financial statements of the Group as at and for the six months ended 30 June 2020 comprise the Company and its subsidiaries (together referred to as the "Group").

The consolidated financial statements of the Group as at and for the year ended 31 December 2019 are available upon request from the Company's registered office or at www.argogrouplimited.com.

The principal activity of the Company is that of a holding company and the principal activity of the wider Group is that of an investment management business. The functional and presentational currency of the Group undertakings is US dollars.

Wholly owned subsidiaries Country of incorporation

 
 Argo Capital Management Limited            United Kingdom 
 Argo Capital Management Cyprus Limited     Cyprus 
 Argo Capital Management Property Limited   Cayman Islands 
  (dissolved in June 2020) 
 Argo Property Management Srl               Romania 
 
   2.       ACCOUNTING POLICIES 
   (a)     Basis of preparation 

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2019.

The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2019.

These condensed consolidated interim financial statements were approved by the Board of Directors on 30 July 2020.

   b)      Financial instruments and fair value hierarchy 

The following represents the fair value hierarchy of financial instruments measured at fair value in the Condensed Consolidated Statement of Financial Position. The hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement

   3.      SEGMENTAL ANALYSIS 

The Group operates as a single asset management business.

The operating results of the companies are regularly reviewed by the Directors of the Group for the purposes of making decisions about resources to be allocated to each company and to assess performance. The following summary analyses revenues, profit or loss, assets and liabilities:

 
 
                                       Argo Capital                      Argo Capital 
                                         Management     Argo Capital       Management   Six months 
                          Argo Group       (Cyprus)       Management         Property        ended 
                                 Ltd            Ltd              Ltd              Ltd      30 June 
                                2020           2020             2020             2020         2020 
                             US$'000        US$'000          US$'000          US$'000      US$'000 
 
 Total revenues 
  for reportable 
  segments customers               -            120            1,227              144        1,491 
 Intersegment 
  revenues                         -            120                -                -          120 
 
 Total profit/(loss) 
  for reportable 
  segments                       818              -            (423)            (201)          194 
 Intersegment 
  profit/(loss)                    -            120            (120)                -            - 
 
 Total assets 
  for reportable 
  segments assets             20,370            341            1,460              303       22,474 
 Total liabilities 
  for reportable 
  segments                         6             90              857               78        1,031 
=====================  =============  =============  ===============  ===============  =========== 
 
 
 Revenues, profit or loss, assets and liabilities    Six months 
  may be reconciled as follows: 
                                                          Ended 
                                                        30 June 
                                                           2020 
                                                        US$'000 
 Revenues 
 Total revenues for reportable segments                   1,491 
 Elimination of intersegment revenues                     (120) 
==================================================  =========== 
 Group revenues                                           1,227 
==================================================  =========== 
 
 Profit or loss 
 Profit for reportable segments                             194 
 Elimination of intersegment loss                             - 
 Other unallocated amounts                                    - 
==================================================  =========== 
 Profit on ordinary activities before taxation              194 
==================================================  =========== 
 
 Assets 
 Total assets for reportable segments                    25,358 
 Elimination of intersegment receivables                (2,884) 
 Group assets                                            22,474 
==================================================  =========== 
 
 Liabilities 
 Total liabilities for reportable segments                3,915 
 Elimination of intersegment payables                   (2,884) 
==================================================  =========== 
 Group liabilities                                        1,031 
==================================================  =========== 
 
 
 
                                       Argo Capital                      Argo Capital 
                                         Management     Argo Capital       Management   Six months 
                          Argo Group       (Cyprus)       Management         Property        ended 
                                 Ltd            Ltd              Ltd              Ltd      30 June 
                                2019           2019             2019             2019         2019 
                             US$'000        US$'000          US$'000          US$'000      US$'000 
 
 Total revenues 
  for reportable 
  segments customers               -            437            1,748              687        2,872 
 Intersegment 
  revenues                         -            437                -                -          437 
 
 Total profit/(loss) 
  for reportable 
  segments                     1,114            135              157               70        1,476 
 Intersegment 
  profit/(loss)                    -            437            (437)                -            - 
 
 Total assets 
  for reportable 
  segments assets             20,034            346            1,100              690       22,170 
 Total liabilities 
  for reportable 
  segments                         6             10               92              110          218 
=====================  =============  =============  ===============  ===============  =========== 
 
 
 Revenues, profit or loss, assets and liabilities    Six months 
  may be reconciled as follows: 
                                                          Ended 
                                                        30 June 
                                                           2019 
                                                        US$'000 
 Revenues 
 Total revenues for reportable segments                   2,872 
 Elimination of intersegment revenues                     (437) 
==================================================  =========== 
 Group revenues                                           2,435 
==================================================  =========== 
 
 Profit or loss 
 Total profit for reportable segments                     1,495 
 Elimination of intersegment loss                             - 
 Other unallocated amounts                                    - 
==================================================  =========== 
 Profit on ordinary activities before taxation            1,495 
==================================================  =========== 
 
 Assets 
 Total assets for reportable segments                    22,546 
 Elimination of intersegment receivables                  (376) 
 Group assets                                            22,170 
==================================================  =========== 
 
 Liabilities 
 Total liabilities for reportable segments                  594 
 Elimination of intersegment payables                     (376) 
==================================================  =========== 
 Group liabilities                                          218 
==================================================  =========== 
 
   4.   SHARE-BASED INCENTIVE PLANS 

On 14 March 2011 the Group granted options over 5,900,000 shares to directors and employees under The Argo Group Limited Employee Stock Option Plan. All options are exercisable at 24p per share within 10 years of the grant date.

The fair value of the options granted was measured at the grant date using a Black-Scholes model that takes into account the effect of certain financial assumptions, including the option exercise price, current share price and volatility, dividend yield and the risk-free interest rate. The fair value of the options granted is spread over the vesting period of the scheme and the value is adjusted to reflect the actual number of shares that are expected to vest.

The principal assumptions for valuing the options are:

 
 Exercise price (pence)          24.0 
 Weighted average share price 
  at grant date (pence)          17.0 
 Weighted average option life 
  (years)                        10.0 
 Expected volatility (% p.a.)    15.0 
 Dividend yield (% p.a.)         10.0 
 Risk-free interest rate (% 
  p.a.)                          0.907 
 

The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The total charge to employee costs in respect of this incentive plan is GBPnil (30 June 2019: GBPnil)

The number and weighted average exercise price of the share options during the period is as follows:

 
                                       Weighted average   No. of share 
                                        exercise price       options 
 Outstanding at beginning of period         24.0p          4,115,000 
 Granted during the period                    -                 - 
 Forfeited during the period                  -                - 
====================================  =================  ============= 
 Outstanding at end of period               24.0p          4,115,000 
====================================  =================  ============= 
 Exercisable at end of period               24.0p          4,115,000 
====================================  =================  ============= 
 

The options outstanding at 30 June 2020 have an exercise price of 24p and a weighted average contractual life of 1 year. Outstanding share options are contingent upon the option holder remaining an employee of the Group.

No share options were issued during the period.

   5.      TAXATION 

Taxation rates applicable to the parent company and the Cypriot, UK, Luxembourg, Cayman and Romanian subsidiaries range from 0% to 19% (2019: 0% to 19%).

 
    Consolidated statement of profit or 
     loss                                       Six months       Six months 
                                                     ended            Ended 
                                                   30 June          30 June 
                                                      2020             2019 
                                                   US$'000          US$'000 
 
 Taxation charge for the period on Group 
  companies                                               -              19 
=========================================  ================  ============== 
 

The charge for the period can be reconciled to the profit shown on the Condensed Consolidated Statement of profit or loss as follows:

 
                                                        Six months      Six months 
                                                             Ended           Ended 
                                                           30 June         30 June 
                                                              2020            2019 
                                                           US$'000         US$'000 
 
 Profit before tax                                             194           1,495 
==================================================  ==============  ============== 
 
   Applicable Isle of Man tax rate for                           -               - 
    Argo Group Limited of 0% 
   Timing differences                                            -               - 
   Non-deductible expenses                                       -               - 
   Other adjustments                                             -            (31) 
   Tax effect of different tax rates of 
    subsidiaries operating in other jurisdictions                -              50 
==================================================  ==============  ============== 
   Tax charge                                                    -              19 
==================================================  ==============  ============== 
 
 
   Consolidated statement of financial 
    position 
                                              30 June       31 December 
                                                 2020              2019 
                                              US$'000           US$'000 
 
 Corporation tax payable                             -              (4) 
=======================================  =============  =============== 
 
   6.      EARNINGS PER SHARE 

Earnings per share is calculated by dividing the net profit for the period by the weighted average number of shares outstanding during the period.

 
                                                Six months      Six months 
                                                     ended           ended 
                                                   30 June         30 June 
                                                      2020            2019 
                                                   US$'000         US$'000 
 
 Net profit for the period after taxation 
  attributable to members                              194           1,476 
==========================================  ==============  ============== 
 
                                                    No. of          No. of 
                                                    shares          shares 
 
 Weighted average number of ordinary 
  shares for basic earnings per share           38,959,986      42,996,432 
 Effect of dilution (Note 4)                     4,115,000       4,340,000 
==========================================  ==============  ============== 
 Weighted average number of ordinary 
  shares for diluted earnings per share         43,074,986      47,336,432 
==========================================  ==============  ============== 
 
 
                                    Six months      Six months 
                                         Ended           ended 
                                       30 June         30 June 
                                          2020            2019 
                                           US$             US$ 
 
 Earnings per share (basic)              0.004            0.03 
 Earnings per share (diluted)            0.005            0.03 
==============================  ==============  ============== 
 
   7.      LAND, FIXTURES, FITTINGS AND EQUIPMENT 
 
                                                  Fixtures, 
                                     Right         fittings 
                                    of use    and equipment                              Total 
                                    assets                       Land 
                                USD'000000          US$'000   US$'000                  US$'000 
 Cost 
 At 1 January 2019                       -              266       184                      450 
 IFRS 16 recognition at 
  1 January 2019                       717                -         -                      717 
 Additions                              91                5         -                       96 
 Disposals                               -             (31)         -                     (31) 
 Foreign exchange movement               -               20       (5)                       15 
===========================  =============  ===============  ========  ======================= 
 At 31 December 2019                   808              260       179                    1,247 
 Additions                               -                1         -                        1 
 Foreign exchange movement            (49)              (9)         2                     (56) 
===========================  =============  ===============  ========  ======================= 
 At 30 June 2020                       759              252       181                    1,192 
===========================  =============  ===============  ========  ======================= 
 
 Accumulated Depreciation 
 
 At 1 January 2019                       -              238         -                      238 
 IFRS 16 recognition at 
  1 January 2019                       191                -         -                      191 
 Depreciation charge for 
  period                               153                9         -                      162 
 Disposals                               -             (31)         -                     (31) 
 Foreign exchange movement               -               26         -                       26 
===========================  =============  ===============  ========  ======================= 
 At 31 December 2019                   344              242         -                      586 
 Depreciation charge for 
  period                                91                6         -                       97 
 Foreign exchange movement            (18)             (14)         -                     (32) 
===========================  =============  ===============  ========  ======================= 
 At 30 June 2020                       417              234         -                      651 
===========================  =============  ===============  ========  ======================= 
 
 Net book value 
 At 31 December 2019                   464               18       179                      661 
===========================  =============  ===============  ========  ======================= 
 At 30 June 2020                       342               18       181                      541 
===========================  =============  ===============  ========  ======================= 
 
   8.       FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 
 
 
                                        30 June 2020       30 June 2020 
 Holding   Investment in management       Total cost         Fair value 
            shares 
                                             US$'000            US$'000 
 
   10      The Argo Fund Ltd                       -                  - 
   100     Argo Distressed Credit                  -                  - 
            Fund Ltd 
    -      Argo Special Situations                 -                  - 
            Fund LP 
                                                   -                  - 
========  =========================  ===============    =============== 
 
 
 Holding   Investment in ordinary      Total cost       Fair value 
            shares 
                                          US$'000          US$'000 
 
 23,061    The Argo Fund Ltd*               6,226            7,821 
    -      Argo Special Situations              -                - 
            Fund LP 
           Argo Distressed Credit 
    9       Fund Limited*                      56               18 
========  ========================  =============    ============= 
                                            6,282            7,839 
========  ========================  =============    ============= 
 
 
                                        31 December       31 December 
                                               2019              2019 
 Holding   Investment in management      Total cost        Fair value 
            shares 
                                            US$'000           US$'000 
 
   10      The Argo Fund Ltd                      -                 - 
   100     Argo Distressed Credit                 -                 - 
            Fund Ltd 
    1      Argo Special Situations                -                 - 
            Fund LP 
                                                  -                 - 
========  =========================  ==============    ============== 
 
 
 Holding   Investment in ordinary      Total cost       Fair value 
            shares 
                                          US$'000          US$'000 
 
 57,301    The Argo Fund Ltd*              15,472           18,587 
           Argo Special Situations 
   115      Fund LP                           115               56 
           Argo Distressed Credit 
   221      Fund Ltd*                         786              770 
========  ========================  =============    ============= 
                                           16,373           19,413 
========  ========================  =============    ============= 
 

*Classified as current in the consolidated statement of Financial Position

Note that some of the Argo Funds listed above may have investments in each other.

   9.   TRADE AND OTHER RECEIVABLES 
 
                                     At 30 June     At 31 December 
                                           2020               2019 
                                       US$ '000           US$ '000 
 
 Trade receivables - Gross               10,141             10,489 
 Less: provision for impairment 
  of trade receivables                  (9,995)            (9,733) 
--------------------------------  -------------  ----------------- 
 Trade receivables - Net                    146                756 
 Other receivables                          209                105 
 Prepayments and accrued income              97                 90 
================================  =============  ================= 
                                            452                951 
================================  =============  ================= 
 

The Directors consider that the carrying amount of trade and other receivables approximates their fair value. All trade receivable balances are recoverable within one year from the reporting date except as disclosed below.

The movement in the Group's provision for impairment of trade and loan receivables is as follow:

 
                                At 30 June     At 31 December 
                                      2020               2019 
                                  US$ '000           US$ '000 
 
 Opening balance                    12,405             11,803 
 Bad debt recovered                      -              (335) 
 Charged during the period             203              1,270 
 Foreign exchange movement              75              (333) 
===========================  =============  ================= 
 Closing balance                    12,683             12,405 
===========================  =============  ================= 
 

10. LOANS AND ADVANCES RECEIVABLE

 
                                                 At 30 June      At 31 December 
                                                       2020                2019 
                                                    US$'000             US$'000 
 
   Deposits on leased premises - current                 12                   - 
   Deposits on leased premises - non-current 
   (see below)                                          101                 120 
   Other loans and advances receivable               11,929                   - 
    - non-current (note 14) 
==============================================  ===========  ================== 
                                                     12,042                 120 
==============================================  ===========  ================== 
 
 

The deposits on leased premises are retained by the lessor until vacation of the premises at the end of the lease term as follows:

 
                                          At 30 June      At 31 December 
                                                2020                2019 
                                             US$'000             US$'000 
 Non-current: 
 Lease expiring in second year                    12                   - 
  after the reporting date 
 Lease expiring in second year 
  after the reporting date                       101                  12 
 Lease expiring in third year after 
  the reporting date                               -                 108 
                                                 113                 120 
====================================  ==============  ================== 
 
   11.     SHARE CAPITAL 

The Company's authorised share capital is unlimited with a nominal value of US$0.01.

 
                               30 June     30 June      31 December      31 December 
                                  2020        2020             2019             2019 
                                   No.     US$'000              No.          US$'000 
 Issued and fully paid 
 Ordinary shares of 
  US$0.01 each              38,959,986         390       38,959,986              390 
=======================  =============  ==========  ===============  =============== 
                            38,959,986         390       38,959,986              390 
=======================  =============  ==========  ===============  =============== 
 

The Directors did not recommend the payment of a final dividend for the year ended 31 December 2019 and do not recommend an interim dividend in respect of the current period.

12. RECONCILIATION OF NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES TO PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION

 
                                                  Six months     Six months 
                                                       ended          ended 
                                                30 June 2020        30 June 
                                                                       2019 
                                                     US$'000        US$'000 
 
 Profit on ordinary activities before 
  taxation                                               194          1,495 
 
 Interest income                                       (409)           (90) 
 Depreciation on fixtures, fittings 
  and equipment                                            6              5 
 Depreciation on right of use asset                       91              - 
 Realised and unrealised gain                          (205)        (1,438) 
 Net foreign exchange (profit)/loss                    (313)             20 
 Increase in payables                                     97             34 
 Decrease/(increase) in receivables, 
  loans and advances                                     754           (48) 
 Corporation tax paid                                   (20)           (10) 
 Net cash inflow/(outflow) from operating 
  activities                                             195           (32) 
==========================================  ================  ============= 
 
   13.     FAIR VALUE HIERARCY 

The table below analyses financial instruments measured at fair value at the end of the reporting period by the level of the fair value hierarchy (note 2b).

At 30 June 2020

 
                             Level 1    Level 2    Level 3      Total 
                            US$ '000   US$ '000   US$ '000   US$ '000 
 Financial assets 
  at fair value through 
  profit or loss                   -      7,839          -      7,839 
========================  ==========  =========  =========  ========= 
 

At 31 December 2019

 
                             Level 1    Level 2    Level 3      Total 
                            US$ '000   US$ '000   US$ '000   US$ '000 
 Financial assets 
  at fair value through 
  profit or loss                   -     19,357         56     19,413 
========================  ==========  =========  =========  ========= 
 

The following table shows a reconciliation from the opening balances to the closing balances for fair

value measurements in Level 3 of the fair value hierarchy:

 
                                    Unlisted            Listed open 
                                closed ended       ended investment 
                                  investment                   fund 
                                        fund       Emerging Markets 
                                 Real Estate                             Total 
                                    US$ '000               US$ '000   US$ '000 
 
 Balance as at 1 January 
  2020                                      -                    56         56 
 Total profit recognized                   -                      -          - 
  in profit or loss 
 Transfer to ADCF                           -                  (56) 
 Balance as at 30 June                      -                     -          - 
  2020 
=========================  ==================  ====================  ========= 
 
   14.   RELATED PARTY TRANSACTIONS 

Most Group revenues derive from funds or entities in which one of the Company's directors, Kyriakos Rialas, has an influence through directorships and the provision of investment advisory services.

At the reporting date the Company holds investments in The Argo Fund Limited and Argo Distressed Credit Fund Limited . These investments are reflected in the accounts at fair value of US$7.8 million, and US$0.02 million respectively.

The management contract with AREOF was terminated on 1 January 2020. As at the period end, AREOF owed US$12.2 million (EUR10.9 million) (31 December 2019: US$12.1 million (EUR10.9 million)). These balances are carried at US$ nil (31 December 2019: US$ nil) in the financial statements.

David Fisher, a non-executive director of the Company, is also a non-executive director of AREOF.

During the period, the Group also made a loan for $11.2 million to Argo Real Estate Limited Partnership, an entity that is 100% owned by Andreas Rialas. The loan carries an interest rate of 9% with a final maturity of July 2027.

15. TRADE AND OTHER PAYABLES

 
                                  At 30 June   At 31 December 
                                        2020             2019 
                                    US$ '000         US$ '000 
 
 Trade creditors                         434               17 
 Other creditors and accruals            436              426 
===============================  ===========  =============== 
 Total current trade and other 
  payables                               870              443 
===============================  ===========  =============== 
 

Trade creditors are normally settled on 30-day terms.

 
                                      At 30 June   At 31 December 
                                            2020             2019 
                                        US$ '000         US$ '000 
 
 Other creditors and accruals                161              280 
===================================  ===========  =============== 
 Total non-current trade and other 
  payables                                   161              280 
===================================  ===========  =============== 
 
   16.   PRIOR YEAR ADJSUTMENTS 

The comparatives have been restated for correction of performance fees for the prior period. Comparatives were adjusted by decreasing performance fees and debtors by $0.2 million. As a result, the opening revenue reserve at 1 January 2020 has been adjusted downward by $0.2 million.

 
                                 US$'000 
 Opening revenue reserve at 1 
  January 2020                   (1,357) 
                                -------- 
 Prior year adjustment            (189) 
                                -------- 
 Restated opening reserve at 
  1 January 2020                 (1,546) 
                                ======== 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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